Nick’s Note: Regular readers know we’re big fans of cryptocurrencies. And it’s no surprise why…
Bitcoin is up 784% since we recommended it in our Palm Beach Letter portfolio in April 2016. Another one of our picks is up 3,083% over the same time span. And two of our smaller crypto plays are up an average of 1,000% since March 2017.
Every investor is now wondering if this mania has legs, or if it’s a bubble that’s about to burst.
Longtime PBRG friend and legendary speculator Doug Casey has been on the winning side of more manias than we can count. He was also an early investor in bitcoin.
Doug isn’t just bullish on cryptos—he’s buying them hand over fist.
Below is a transcript of a recent conversation between Doug and Casey Daily Dispatch editor Justin Spittler. I encourage you to read it closely.
Justin Spittler, editor, Casey Daily Dispatch: Recently, you told me how a young Belgian man gifted you a bitcoin. Have you bought any more since then?
Doug Casey, founder, Casey Research: Yes. I’ve put $100,000 in them. It’s no longer early days, that’s for sure. But perhaps it’s like getting into the internet stocks back in 1998—they weren’t cheap, but the bubble got much, much bigger. And the internet—contrary to what people like Paul Krugman thought—was not itself a bubble. Up till now, the only way to play this has been the coins, the tokens, like bitcoin.
Justin: Got it. Do you own any other cryptos?
Doug: Yeah, I’ve got Ethereum, and a couple of others as speculations. There are perhaps a thousand of them out there now, and most of them are garbage.
So, I’m getting involved in these cryptocurrencies on several levels. I’m trying to make the trend my friend. But cautiously, because there’s a lot of speculation going on.
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And as you know, the Chinese are clamping down on the area right now—but that’s going to change.
Justin: It doesn’t seem like you’re too concerned about all this bubble talk then.
Doug: Not true. I am concerned. The market is very, very bubbly. But I think it’s going higher, for several reasons. One is that some of the cryptos have great utility, and only about 25 million out of the 7 billion people in the world have them. They’re going to get much bigger in the developed world, but even bigger in the Third World.
In all of Africa, most of South America, and a great part of Asia, fiat currencies issued by governments are a joke. They’re extremely unreliable within those countries. And they’re totally worthless outside the physical borders of the country. That’s why those people want dollars.
I think that the Third World will adopt bitcoin and some other coins in a huge way.
This is because people who own cryptocurrencies, at least for the time being, are making money. They’re saving an appreciating asset rather than a depreciating asset. You’re on a Sisyphean treadmill if you try to save a Third World currency—but three-quarters of humanity have no alternative.
These coins are also private. They can transfer wealth outside of the country, which is very helpful. Kwachas, pulas, pesos, and such are worthless outside of the country that issues them. Of course, governments hate that, and this will present a big problem down the road.
The whole Third World is going to go to these cryptocurrencies. They all have smartphones in these countries. A phone is the first thing they buy after food and clothing.
Sure, it’s a bubbly market. But soon billions more people will be participating in it. So, it’s going to get more bubbly. That’s my argument.
Justin: I’ve never heard that argument before, but it makes a lot of sense.
So, do you view cryptos mainly as speculation? Or do you also see them as a chaos hedge?
Doug: Well like I said, cryptocurrencies are just the first application of blockchain technology. I think they have staying power simply because government fiat currencies are bad, and will be getting worse. They’re not going away. But I view them mainly as a speculative opportunity right now.
How high is bitcoin going to go? Bitcoin is kind of the numeraire. It’s the gold standard, as it were, of cryptocurrencies. John McAfee, who founded the cyber security giant McAfee, Inc., thinks it’s headed much higher.
I recently got together with John. I stayed at his house, we spent a day together, had drinks and cigars, and got along extremely well. He’s a very, very bright, knowledgeable, and entertaining guy.
He thinks bitcoin’s going to $50,000.
That sounds outrageous, but it’s entirely possible. Another 10-1 in a manic market is possible—this brings up thoughts of tulip bulbs, of course.
Remember, central banks all over the world are printing up fiat currencies by the trillions, desperately trying to put off a collapse of the world economy. Many will issue their own cryptos—they’re trying to totally abolish paper cash as we speak. And they won’t want competition from private currencies like bitcoin. Governments may well try to outlaw peer-to-peer cryptos. But that’s another topic.
Justin: Very exciting stuff. But I need to ask you one last thing before I let you go… How do bitcoin and these cryptocurrencies relate to gold? Are they good or bad for gold?
I’m sure many of our readers are wondering this, too.
Doug: They’re very good for gold. Extremely good. That’s because they’re drawing attention to the nature of the monetary system. That’s something few people think about. At all.
When people buy these cryptocurrencies, even if they know nothing about hard money, economics, or monetary theory, they inevitably ask themselves, “Hmm, bitcoin or the dollar?” They’re both currencies. Then they can start asking questions about the nature of the dollar…the nature of inflation…and whether the dollar has any real value, and what’s going to happen to it, and why.
People are going to start asking themselves these questions—which wouldn’t have occurred to them otherwise. They’re going to see that only a certain number of bitcoin will ever be issued. But dollars can be created by the trillions, by the hundreds of trillions.
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That’s going to make them very suspicious of the dollar. It’s going to get a lot of people thinking about money and economics in a way that they never thought about it before. And this is inevitably going to lead them to gold.
So, the bitcoin and cryptocurrency revolution will prove extremely valuable for gold. It’s going to draw the attention of millions, or hundreds of millions of people, to gold as the real alternative to the dollar and other currencies, after bitcoin.
Plus, I suspect future versions of bitcoin, or bitcoin 2.0, will be easily redeemable in gold grams. So, this is actually a big deal that most people aren’t looking at.
[Editor’s note: To hear more from Doug on why bitcoin will drive gold to all-time highs, check out this new video.]
Justin: That makes a lot of sense, but I don’t think most people view cryptos this way. They see cryptos as a threat to gold, rather than something that could send gold much higher.
But anyway, that’s everything I wanted to ask you today. So, thank you for sharing those unique insights.
Doug: Sure, any time.
IN CASE YOU MISSED IT…
By mid-2018, our great bull market will be ending. Millions of “herd” investors will be ruined.
You—the lone wolf—will have avoided the herd hysteria and wisely positioned yourself into a recession-proof million-dollar nest egg by investing in this ignored corner of the market…
